Google’s parent company, Alphabet, is suffering a setback because it is now subject to a court order permitting competition within its Android operating system.
The ruling requires Alphabet to permit rival app stores and payment systems, enabling developers to compete directly with Google’s own Play Store.
This decision gives the tech giant another antitrust loss as they have faced scrutiny over market dominance.
Background
The ruling follows a lawsuit filed by Epic Games, creator of the popular video game Fortnite.
Epic argued that Google used its monopoly to suppress competition and set hefty fees on developers.
U.S. District Judge James Donato’s judgement restricts Google from exclusive agreements that prioritize its Play Store on Android devices.
It also prevents Google from requiring developers to use its proprietary billing system, which collects fees as high as 30 percent.
Restrictions on Google’s Revenue-Sharing Deals with Manufacturers
As part of the injunction, Google can no longer strike deals with manufacturers like Samsung and LG to exclusively promote its Play Store.
These agreements previously ensured that Google’s marketplace would be prominently featured on Android home screens.
With the ruling, Google is also prohibited from paying manufacturers to exclude rival app stores.
The injunction, which takes effect on November 1, will last for three years.
Impact on Google’s Play Store Business
The changes are expected to impact the companies popular Play Store.
According to statista, Google’s Play Store generated $48 billion in operating profit in 2021.
With increased competition, the company could see a decline in revenue from the Play Store, a major contributor to its profits.
Following the news, Alphabet shares fell by 2.3 percent.
Google Plans to Appeal the Decision
Google has expressed its intent to appeal the decision, arguing that opening its platform to third-party app stores could compromise user security and privacy.
The company also pointed out that Apple, which controls the iOS ecosystem, does not face the same restrictions, suggesting that competition already exists between Apple and Android.
This ruling could bring a shift in how tech giants are regulated, particularly regarding control over app marketplaces.
Although Epic previously lost a similar case against Apple, which restricted third-party stores on iOS, it continues to challenge Apple’s practices, with a potential Supreme Court review on the horizon.
What do you need to know?
The injunction against Google’s app store practices is just one of several antitrust cases the company is currently fighting.
The Department of Justice recently won a case against the tech giant for its alleged monopoly in online search.
Additionally, a separate trial is underway regarding Google’s dominance in digital advertising, where the future of its $20 billion ad tech business is at stake.
